Account

The Mail Bag: Your Real Estate Questions Answered

Question: I recently had a leak in my unit that damaged wall and flooring and I am in a battle with the HOA regarding who is responsible for the repair charges. My unit is in a mid-rise condominium. The leak was coming from a rooftop chiller pipe that feeds the air conditioning units for me and several neighbors. The plumber determined that the pipe was leaking because of improper soldering. The board says neither the plumbing repair or damage to my unit is the HOA’s responsibility.

Answer: This is a classic example of why all HOAs (particularly the common wall kind) should have a clear Areas of Maintenance and Insurance Policy that defines who (owner or HOA) is responsible. This policy should identify all building and grounds components and where the dividing line is between common and non-common. Most governing documents are not precise in defining this so the board needs to adopt a policy that gets more specific. This policy not only helps avoid disputes but directs the various insurance companies concerning their responsibility to cover certain damage claims. The importance of this policy cannot be understated.

Question: I’m getting ready to sell my personal residence. Everyone around me assumes I’ll have to pay taxes unless I reinvest it in another home, but the IRS website says I can exclude up to $250,000 profit on the home if I meet this certain criteria, which I do. I’m not looking to buy another home anytime soon and would like to save the majority of the profit for the future, as well as some short-term use, like maxing out my Roth IRA. Will I be able to keep the entire profit?

Answer: Generally speaking, it’s always better to believe the IRS website vs. your friends. In this case, the IRS website is true. It’s known as the home sale exclusion or section 121. Basically, you can exclude a profit of $250,000 or $500,000 if you’re married and you file jointly. There are some restrictions, the biggest of which is: the house that you’re selling must have been your main home for at least two of the past five years, and that you haven’t claimed the home sale exclusion already during the past two years.

If you don’t meet that criteria, there are actually still some ways to get the exclusion at least partially. If you moved for job purposes, there’s some medical reasons, if you worked for some branches of the government. So, even if you don’t meet those criteria, dig a little deeper, you might at least get a partial exclusion.

Question: If I have waited too long to buy a house since 2010, how much more money will it cost me now than if I had bought then?

Answer: The quick answer: more, but it could be far worse. The media has an annoying habit of only yapping about interest rates when they go up. They rise AND fall in small increments due to market forces. They quietly fall just about every week! The lowest avg. mortgage rate ever was 3.31% in 2011. Currently, rates are only 1.5 points higher than that all-time low and a whopping 14 points below the all-time high average interest rate of 18.63% in 1981. How we avoided a depression with those rates is the better question to ask.

On a $450,000 loan at a 4.8% you will pay $2,361/month in principal and interest ($849,958 over 30 years). Had you bought then, your payment would have been $1,971/month in principal and interest. ($709,487 over 30 years). Yep, you could’ve saved $140,000. The solution? Don’t do it again. Waiting until rates hit 6.3% will cost you another $140,000… You can get into a home with as little as 1% down. Ask me how.